EXHIBIT C
CERTIFICATE OF DESIGNATION
OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
VALUESTAR CORPORATION
VALUESTAR CORPORATION, a corporation organized and existing under the
Colorado Business Corporation Act (the "corporation"), in accordance with
Colo. Rev. Stat. Section 7-106-102,
HEREBY CERTIFIES:
1. The name of the Corporation is: Valuestar Corporation.
2. The text of the amendment determining the designations, preferences,
limitations, and relative rights of the class or series of shares is as
set forth on Exhibit "A", attached hereto and by this reference
incorporated herein.
3. This amendment was adopted on September ___, 2000.
4. This amendment was duly adopted by the Board of Directors of the
Corporation.
The undersigned does hereby confirm, under penalties of perjury, that the
foregoing Certificate of Designation of Valuestar Corporation constitutes the
act and deed of the Corporation, and that the facts stated herein are true.
Executed at Oakland, California on September 14, 2000
------------------------------------
James Stein, Chief Executive Officer
<PAGE>
Exhibit "A"
RESOLVED, that pursuant to the authority granted to the Board of Directors
by Article THIRD, Paragraph I of the Articles of Incorporation of the
Corporation, as amended (the "Articles"), Certificate there is hereby created,
and the Corporation be, and it hereby is, authorized to issue One Million Three
Hundred Thirty-Three Thousand Three Hundred Thirty-Three (1,333,333) shares of a
series of convertible preferred stock, designated "SERIES C CONVERTIBLE
PREFERRED STOCK," which Series C Convertible Preferred Stock (also referred to
herein as "Series C Stock" or "Series C Preferred Stock") shall have, in
addition to the rights, restrictions, preferences and privileges set forth in
the Articles, the following terms, conditions, rights, restrictions, preferences
and privileges:
"A. DIVIDENDS.
1. GENERALLY. Subject to the preferential dividend rights of the
holders of the Corporationss.s Series A Convertible Preferred Stock ("Series A
Stock"), and Series B Convertible Preferred Stock ("Series B Stock") each holder
of outstanding shares of Series C Stock shall be entitled to receive, when and
if declared by the Board of Directors and out of any funds legally available
therefor, cumulative dividends at the annual rate of $1.80 per share (the
"Series C Preferential Dividend"), and in preference to any declaration or
payment (payable other than in Common Stock) of dividends with respect to the
Common Stock. No cash dividends shall be declared and paid on the Common Stock
or any other equity of the Company except the Series A Stock and Series B Stock
as contemplated above unless a like cash dividend amount has been paid to the
Series C Stock on an as converted basis.
2. PAYMENT OTHER THAN CASH. If the Corporation shall declare a
distribution payable in securities of persons other than this Corporation,
evidences of indebtedness issued by the Corporation or other persons, assets
(excluding cash dividends) or options or rights to purchase any such securities
or evidences of indebtedness, then, in each such case, the holders of Series C
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though the holders of Series C Preferred Stock were the holders
of the number of shares of Common Stock of the Corporation into which their
respective shares of Series C Preferred Stock are convertible as of the record
date fixed for the determination of the holders of Common Stock of the
Corporation who are entitled to receive such distribution.
3. DIVIDEND ADJUSTMENT. The Series C Preferential Dividend shall be
appropriately adjusted for any stock splits, dividends, combinations,
recapitalizations and the like ("Appropriately Adjusted").
B. PREFERENCE ON LIQUIDATION.
1. PREFERENCE PRICE. Except upon a oQualified Liquidation Event,o in
the event of any liquidation, dissolution or winding up of this Corporation,
whether voluntary or involuntary, the holders of the outstanding shares of
Series C Stock shall be entitled to be paid out of the assets of this
Corporation available for distribution to its shareholders, whether from
capital, surplus funds or earnings, after payment of the preferential amount is
made in respect of the shares of Series A Stock (the oSeries A Preference
Priceo) and Series B Stock (the oSeries B Preference Priceo) and before any
payment is made in respect of the shares of Common Stock, in an amount equal to
$22.50 per share (Appropriately Adjusted), together with an amount equal to the
greater of (A) eight percent (8%) of such $22.50 at the rate of 8% for each year
(or fraction thereof) after the date of the issuance of each such share of
Series C Stock, less the amount, if any, of any cash dividends actually paid to
the Series C Stock through the date of liquidation, or (B) any declared and
unpaid dividends thereon (the oSeries C Preference Priceo). After payment of the
Series C Preference Price to the holders of outstanding shares of Series C
Stock, the remaining assets of the Corporation shall be distributed ratably
solely among the holders of the outstanding shares of Common Stock in an equal
amount per share.
2. PARTIAL PAYMENT. If, upon any such liquidation, dissolution or
winding up of this Corporation, whether voluntary or involuntary, the assets of
this Corporation available for distribution to its shareholders shall be
insufficient to pay in full the Series C Preference Price required to be paid to
the holders of the outstanding shares of Series C Stock after payment in full of
the Series A Preference Price and Series B Preference Price, then all of the
assets of this Corporation legally available for distribution to the holders of
equity securities shall be distributed ratably among the holders of the
outstanding shares of Series C Stock in proportion to the Series C Preference
Price upon liquidation that each Series C Stock holder is otherwise entitled to
receive.
3. CERTAIN TRANSACTIONS. The following shall be deemed to be a
liquidation, dissolution or winding up within the meaning of this Section B with
respect to the Series C Stock: (A) a sale of all or substantially all of the
Corporation's assets; or (B) a consolidation, merger or reorganization of the
Corporation with or into any other corporation or corporations if the
Corporation's shareholders do not control a majority of the outstanding voting
securities of such consolidated, merged or reorganized corporation(s). The
Corporation shall provide written notice of each of the above transactions to
each holder of Series C Stock at least ten (10) days prior to such transaction
in accordance with Section D.14 (below).
4. LIQUIDATION ADJUSTMENT. The Series C Preference Price shall be
Appropriately Adjusted.
C. VOTING.
1. GENERALLY. Except as otherwise required by law or expressly
provided herein, each share of Series C Preferred Stock shall be entitled to
vote on all matters submitted or required to be submitted to a vote of the
shareholders of the Corporation in the same class and together with the holders
of Common Stock and shall be entitled to the number of votes equal to the number
of whole shares of Common Stock into which such shares of Series C Preferred
Stock are convertible pursuant to the provisions hereof, at the record date for
the determination of shareholders entitled to vote on such matters or, if no
such record date is established, at the date such vote is taken or any written
consent of shareholders is solicited. In each such case, except as otherwise
required by law or expressly provided herein, the holders of shares of Series A
Stock, Series B Stock, Series C Stock and Common Stock shall vote together and
not as separate classes.
2. SPECIAL VOTING FOR THE ELECTION OF DIRECTORS. The Board of
Directors shall be elected as follows:
(i) So long as at least One Hundred Thousand (100,000) shares
of Series A Stock are issued and outstanding (Appropriately Adjusted), the
holders of Series A Stock shall be entitled, voting as a separate class, to
elect one (1) and only one (1) member to the Corporationss.s Board of Directors;
(ii) So long as at least Two Hundred Thousand (200,000) shares
of Series B Stock are issued and outstanding (Appropriately Adjusted), the
holders of Series B Stock shall be entitled, voting as a separate class, to
elect two (2) and only two (2) members to the Corporationss.s Board of
Directors;
(iii) So long as at least Two Hundred Thousand (200,000)
shares of Series C Stock are issued and outstanding (Appropriately Adjusted),
the holders of Series C Stock shall be entitled, voting as a separate class, to
elect one (1) and only one (1) member to the Corporationss.s Board of Directors;
(iv) The remaining authorized members of the Board of
Directors not entitled to be elected by any series of Preferred Stock then
outstanding from time to time shall be elected by the holders of Common Stock
with the holders of Series C Stock voting in the same class as the holders of
Common Stock on an as-converted basis and the holders of Common Stock.
3. REMOVALS OR RESIGNATIONS. Any vacancy created on the
Corporation's Board of Directors shall be filled by a successor Director who
shall be elected in a manner by which his or her predecessor was elected as
provided above. Any Director who has been elected to the Corporation's Board of
Directors as provided above may be removed during his term of office in
accordance with the Business Corporation Act of the State of Colorado, and any
vacancy thereby created shall be filled as provided in this subparagraph.
D. CONVERSION. The holders of the outstanding shares of Series C
Stock shall have the following conversion rights (the "Conversion Rights"):
1. RIGHT TO CONVERT. Each share of Series C Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such shares, at the office of this Corporation or any transfer agent
for the Corporation's shares into that number of shares of Common Stock which is
equal to the quotient obtained by dividing the Series C Preference Price then in
effect for each share of Series C Stock by the Series C Conversion Price (as
such term is hereinafter defined) in effect immediately prior to the time of
such conversion. The initial price at which shares of Common Stock shall be
deliverable upon conversion of shares of Series C Stock shall be $2.25 (as
adjusted from time to time as herein provided, the "Series C Conversion Price").
2. MECHANICS OF CONVERSION. Each holder of outstanding shares of
Series C Stock who desires to convert the same into shares of Common Stock shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of this Corporation or of any transfer agent for the Corporation's shares and
shall give written notice to this Corporation at such office that such holder
elects to convert the same and shall state therein the number of shares of
Series C Stock being converted. Thereupon, this Corporation shall issue and
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay all declared but unpaid dividends on the shares being converted.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the certificate or certificates
representing the shares to be converted, and the person entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Common Stock on such date.
3. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If this Corporation
at any time or from time to time after the date that this Certificate of
Designation was filed with the Colorado Secretary of State (the "Filing Date")
effects a division of the outstanding shares of Common Stock, the Series C
Conversion Price shall be proportionately decreased and, conversely, if this
Corporation at any time, or from time to time, after the Filing Date combines
the outstanding shares of Common Stock, the Series C Conversion Price shall be
proportionately increased. Any adjustment under this Section D.3 shall be
effective on the close of business on the date such division or combination
becomes effective.
4. ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. If this
Corporation at any time or from time to time after the Filing Date pays or fixes
a record date for the determination of holders of shares of Common Stock
entitled to receive a dividend or other distribution in the form of shares of
Common Stock, or rights or options for the purchase of, or securities
convertible into, Common Stock, then in each such event the Series C Conversion
Price shall be decreased, as of the time of such payment or, in the event a
record date is fixed, as of the close of business on such record date, by
multiplying the Series C Conversion Price by a fraction (i) the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the time of such payment or the close of business on such
record date and (ii) the denominator of which shall be (A) the total number of
shares of Common Stock outstanding immediately prior to the time of such payment
or the close of business on such record date plus (B) the number of shares of
Common Stock issuable in payment of such dividend or distribution or upon
exercise of such option or right of conversion; provided, however, that if a
record date is fixed and such dividend is not fully paid or such other
distribution is not fully made on the date fixed therefor, the Series C
Conversion Price shall not be decreased as of the close of business on such
record date as hereinabove provided as to the portion not fully paid or
distributed and thereafter the Series C Conversion Price shall be decreased
pursuant to this Section 4 as of the date or dates of actual payment of such
dividend or distribution.
5. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If this
Corporation at any time or from time to time after the Filing Date pays, or
fixes a record date for the determination of holders of shares of Common Stock
entitled to receive, a dividend or other distribution in the form of securities
of this Corporation other than shares of Common Stock or rights or options for
the purchase of, or securities convertible into, Common Stock, then in each such
event provision shall be made so that the holders of outstanding shares of
Series C Stock shall receive upon conversion thereof, in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of this
Corporation that they would have received had their respective shares of Series
C Stock been converted into shares of Common Stock on the date of such event and
had such holders thereafter, from the date of such event to and including the
actual date of conversion of their shares, retained such securities, subject to
all other adjustments called for during such period under this Section D with
respect to the rights of the holders of the outstanding shares of Series C
Stock.
6. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND Substitution. If,
at any time or from time to time after the Filing Date, the number of shares of
Common Stock issuable upon conversion of the shares of Series C Stock is changed
into the same or a different number of shares of any other class or classes of
stock or other securities, whether by recapitalization, reclassification or
otherwise (other than a recapitalization, division or combination of shares or
stock dividend or a reorganization, merger, consolidation or sale of assets
provided for elsewhere in this Section D), then in any such event each holder of
outstanding shares of Series C Stock shall have the right thereafter to convert
such shares of Series C Stock into the same kind and amount of stock and other
securities receivable upon such recapitalization, reclassification or other
change, as the maximum number of shares of Common Stock into which such shares
of Series C Stock could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein.
7. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF Assets. If,
at any time or from time to time after the Filing Date, there is a capital
reorganization of the Common Stock (other than a recapitalization, division,
combination, reclassification or exchange of shares provided for elsewhere in
this Section D) or a merger or consolidation of this Corporation into or with
another corporation or a sale of all or substantially all of this Corporation's
properties and assets to any other person, then, as a part of such capital
reorganization, merger, consolidation or sale, provision shall be made so that
the holders of outstanding shares of Series C Stock shall thereafter receive
upon conversion thereof the number of shares of stock or other securities or
property of this Corporation, or of the successor corporation resulting from
such merger or consolidation or sale, to which a holder of the number of shares
of Common Stock into which their shares of Series C Stock were convertible would
have been entitled on such capital reorganization, merger, consolidation or
sale. In any such case, appropriate adjustment shall be made in the application
of the provisions of this Section D with respect to the rights of the holders of
the outstanding shares of Series C Stock after the capital reorganization,
merger, consolidation, or sale to the end that the provisions of this Section D
(including adjustment of the Series B Conversion Price and the number of shares
into which the shares of Series B Stock may be converted) shall be applicable
after that event and be as nearly equivalent to such Conversion Prices and
number of shares as may be practicable.
8. SALE OF SHARES BELOW CONVERSION PRICE.
(i) If, at any time or from time to time after the Filing
Date, this Corporation issues or sells, or is deemed by the express provisions
of this Section 8 to have issued or sold, Additional Shares of Common Stock (as
hereinafter defined) for an Effective Price (as hereinafter defined) less than
the then current Series B Conversion Price, other than (A) as a dividend or
other distribution on any class of stock as provided in Section D.4 above or (B)
upon a division or combination of shares of Common Stock as provided in Section
D.3 above, then, in any such event, the Series B Conversion Price shall be
reduced, as of the close of business on the date of such issuance or sale, to an
amount determined by multiplying the Series C Conversion Price by a fraction (A)
the numerator of which shall be (x) the number of shares of Common Stock
outstanding at the close of business on the day immediately preceding the date
of such issuance or sale, plus (y) the number of shares of Common Stock which
the aggregate consideration received (or by the express provisions hereof deemed
to have been received) by this Corporation for the total number of Additional
Shares of Common Stock so issued or sold would purchase at such Series C
Conversion Price and (B) the denominator of which shall be the number of shares
of Common Stock outstanding at the close of business on the date of such
issuance or sale after giving effect to such issuance or sale of Additional
Shares of Common Stock. For the purpose of the calculation described in this
Section 8, the number of shares of Common Stock outstanding shall include, in
addition to the number of shares of Common Stock actually outstanding, (A) the
number of shares of Common Stock into which the then outstanding shares of
Series A Stock, Series B Stock and Series C Stock could be converted if fully
converted on the day immediately preceding the issuance or sale or deemed
issuance or sale of Additional Shares of Common Stock; and (B) the number of
shares of Common Stock which would be obtained through the exercise or
conversion of all rights, options and Convertible Securities (as hereinafter
defined) outstanding on the day immediately preceding the issuance or sale or
deemed issuance or sale of Additional Shares of Common Stock.
(ii) For the purpose of making any adjustment required under
this Section 8, the consideration received by this Corporation for any issuance
or sale of securities shall (A) to the extent it consists of property other than
cash, be the fair value of that property as reasonably determined in good faith
by a disinterested majority of the Board of Directors; and (B) if Additional
Shares of Common Stock, Convertible Securities (as hereinafter defined) or
rights or options to purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of this Corporation for a consideration which covers
both, be the portion of the consideration so received reasonably determined in
good faith by a disinterested majority of the Board of Directors to be allocable
to such Additional Shares of Common Stock, Convertible Securities or rights or
options.
(iii) For the purpose of the adjustment required under this
Section 8, if this Corporation issues or sells any rights or options for the
purchase of, or stock or other securities convertible into, Additional Shares of
Common Stock (such convertible stock or securities being hereinafter referred to
as oConvertible Securitieso) and if the Effective Price (as defined in Clause
(v) below) of such Additional Shares of Common Stock is less than the then
current Series C Conversion Price, this Corporation shall be deemed to have
issued, at the time of the issuance of such rights, options or Convertible
Securities the maximum number of Additional Shares of Common Stock issuable upon
exercise or conversion thereof and to have received as consideration therefor an
amount equal to (A) the total amount of the consideration, if any, received by
this Corporation for the issuance of such rights or options or Convertible
Securities plus (B) in the case of such rights or options, the minimum amount of
consideration, if any, payable to this Corporation upon the exercise of such
rights or options or, in the case of Convertible Securities, the minimum amount
of consideration, if any, payable to this Corporation upon the conversion
thereof. Thereafter, no further adjustment of the Series C Conversion Price
shall be made as a result of the actual issuance of Additional Shares of Common
Stock on the exercise of any such rights or options or the conversion of any
such Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire or
otherwise terminate without having been exercised, the Series C Conversion Price
shall thereafter be the Series C Conversion Price that would have been in effect
had an adjustment been made on the basis that the only Additional Shares of
Common Stock so issued were the Additional Shares of Common Stock, if any,
actually issued or sold on the exercise of such rights or options or rights of
conversion of such Convertible Securities, and were issued or sold for the
consideration actually received by this Corporation upon such exercise plus (A)
the consideration, if any, actually received for the granting of all such rights
or options, whether or not exercised, (B) the consideration, if any, actually
received by issuing or selling the Convertible Securities actually converted and
(C) the consideration, if any, actually received on the conversion of such
Convertible Securities. However, if any such rights or options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Corporation, upon the exercise,
conversion or exchange thereof, the Series C Conversion Price for the Series C
Stock, and any subsequent adjustments based thereon, shall upon any such
increase or decrease becoming effective be recomputed to reflect such increase
or decrease insofar as it affects such rights, options or the rights of
conversion or exchange under such Convertible Securities.
(iv) For the purpose of any adjustment required under this
Section D.8, if (a) this Corporation issues or sells any rights or options for
the purchase of Convertible Securities and (b) if the Effective Price of the
Additional Shares of Common Stock underlying such Convertible Securities is less
than the Series C Conversion Price, then in each such event this Corporation
shall be deemed to have issued at the time of the issuance of such rights or
options the maximum number of Additional Shares of Common Stock issuable upon
conversion of the total number of Convertible Securities covered by such rights
or options (as set forth in the legal instruments setting forth the terms of
such Convertible Securities) and to have received as consideration for the
issuance of such Additional Shares of Common Stock an amount equal to the amount
of consideration, if any, received for the issuance of such rights or options
plus (A) the minimum amount of consideration, if any, payable upon the exercise
of such rights or options and (B) the minimum amount of consideration, if any,
payable upon the conversion of such Convertible Securities. No further
adjustment of the Series C Conversion Price shall be made as a result of the
actual issuance of the Convertible Securities upon the exercise of such rights
or options or upon the actual issuance of Additional Shares of Common Stock upon
the conversion of such Convertible Securities. The provisions of Section
D.8.(iii) for the adjustment of the Series C Conversion Price upon the
expiration of rights or options or the rights of conversion of Convertible
Securities shall apply mutatis mutandis upon the expiration of the rights,
options and Convertible Securities referred to in this Clause D.8.(iv).
(v) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued or deemed to be issued under this Section D.8 after the
Filing Date, other than (A) shares of Common Stock issued upon conversion of the
shares of Series A Stock, the Series B Stock or Series C Stock; (B) shares of
Common Stock (or options, warrants or rights therefor) granted or issued
subsequent to the Filing Date to employees, officers, directors of the
Corporation or any subsidiary pursuant to incentive agreements, stock purchase
or stock option plans, stock bonuses or awards, warrants, contracts or other
arrangements that are approved by the Board of Directors; (C) securities issued
by the Corporation representing in the aggregate five percent (5%) or less of
the then outstanding shares of Common Stock, on a fully-diluted basis, to
contractors, consultants, advisers to, or vendors of, the Corporation or in
connection with any credit, financing or leasing agreements or similar
instruments with equipment lessors or other persons providing equipment lease or
other equipment financing; (D) securities issued in connection with or pursuant
to the acquisition of all or any portion of another company by the Company
whether by merger or any other reorganization or by the purchase of all or any
portion of the assets of another company, pursuant to a plan, agreement or other
arrangement approved by the Board of Directors; (E) securities issued to or in
connection with an arrangement or venture with a strategic partner of the
Company, provided such issuance is unanimously approved by the Board of
Directors; (F) shares of Common Stock or Preferred Stock issued or issuable upon
the exercise of any warrants, options or other rights that are outstanding as of
the Filing Date (or issued or issuable after the reissuance of any such expired
or terminated options, warrants or rights and net of any such issued shares
repurchased by the Corporation); (G) the reissuance or assignment by the
Corporation of any shares of Common Stock outstanding as of the Filing Date to a
different person from the holder of such shares; (H) securities issued pursuant
to any anti-dilution rights of the holders of Series A Stock or Series B Stock
or warrants to purchase securities of this Corporation that are outstanding as
of the Filing Date; (H) shares of Common Stock issued in a public offering by
this Corporation in which all shares of Series A Stock, Series B Stock and
Series C Stock are automatically converted into shares of Common Stock; and (I)
shares of Common Stock issued by way of dividend or other distribution on shares
of Preferred Stock and Common Stock excluded from the definition of Additional
Shares of Common Stock by the foregoing clauses (A), (B), (C), (D), (E), (F),
(G) (H) and this clause (I). The oEffective Priceo of Additional Shares of
Common Stock shall mean the quotient obtained by dividing the total number of
Additional Shares of Common Stock issued or sold, or deemed to have been issued
or sold, under this Section 8 into the aggregate consideration received, or
deemed to have been received for such Additional Shares of Common Stock.
9. CERTIFICATE OF ADJUSTMENT. Upon the occurrence of each adjustment
or readjustment of the Series C Conversion Price, the Corporation, at its sole
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series C Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based.
10. NOTICES OF RECORD DATE. In the event of (i) any taking by this
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution or (ii) any capital reorganization of this
Corporation, any reclassification or recapitalization of the capital stock of
this Corporation, any merger or consolidation of this Corporation with or into
any other corporation, or any transfer of all or substantially all of the assets
of the Corporation, or any voluntary or involuntary dissolution, liquidation or
winding up of this Corporation, this Corporation shall mail to each holder of
shares of Series C Stock at least twenty (20) days prior to the record date
specified therein, a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend or distribution and a description
of such dividend or distribution; (ii) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up, is expected to become effective and the specific
details thereof; and (iii) the date, if any, that is to be fixed as to when the
holders of record of shares of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up.
11. AUTOMATIC CONVERSION.
(i) SERIES C STOCK CONVERSION. Each share of Series C Stock
shall automatically be converted into shares of Common Stock based upon the
Series C Conversion Price upon the automatic conversion of the shares of Series
A Stock pursuant to a "Qualified Liquidation Evento or oQualified Liquidity
Milestoneo as set forth in the Corporationss.s Certificate of Designation of
Series A Convertible Preferred Stock or otherwise upon the conversion of all the
shares of Series A Stock.
(ii) UPON VOTE OF 66-2/3% OF SERIES C PREFERRED STOCK. Each
share of Series C Preferred Stock shall automatically be converted into shares
of Common Stock based upon the Series C Conversion Price then applicable upon
the affirmative vote of the holders of at least sixty-six and two thirds percent
(66-2/3 %) of the outstanding shares of Series C Preferred Stock.
Upon the occurrence of an event specified in this Section 11, the
outstanding shares of Series C Stock shall be converted into outstanding shares
of Common Stock, whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent. Upon the automatic
conversion of the outstanding shares of Series C Stock, the Corporation shall
notify the holders of the outstanding shares of Series C Stock and thereafter
such holders shall surrender the certificates representing such shares at the
office of the Corporation or any transfer agent for the shares. Thereupon there
shall be issued and delivered to such holder, promptly at such office and in its
name as shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the surrendered
shares of Series C Stock of such holder were convertible on the date on which
such automatic conversion occurred.
12. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of the shares of Series C Stock. In lieu of any
fractional share to which the holder of such shares would otherwise be entitled,
the Corporation shall pay cash equal to the product of (i) such fraction
multiplied by (ii) the fair market value of one share of the Common Stock on the
date of conversion, as determined in good faith by a disinterested majority of
the Board of Directors.
13. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of Series C Stock, such number of shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Series C Stock. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of Series C Stock, the Corporation shall take such
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
14. NOTICES. Any notice required by the provisions of this Section D
to be given to a holder of shares of Series C Stock shall be deemed given upon
actual receipt or if receipt is refused or does not occur, then the second
attempted delivery as evidenced by appropriate third-party commercial
documentation (i.e., Postal Service, Federal Express, etc.).
15. NO DILUTION OR IMPAIRMENT. The Corporation shall not amend its
Certificate of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the rights of the holders of the shares of Series C Stock
against dilution (as contemplated herein) or other impairment of their rights.
E. NO RE-ISSUANCE. No share or shares of Series C Stock acquired by
the Corporation by reason of redemption, purchase or otherwise shall be
reissued, and all such shares shall be canceled, retired and eliminated from the
shares which the Corporation shall be authorized to issue.
